Check out the newest article added to our online Knowledge Library, entitled Avoiding Tax Traps with Short-Term Assignments, by Claudia Howe of Global Mobility Tax.

This article clearly addresses some of the common misconceptions about the tax treatment of short-term overseas assignments.  Thanks to Claudia Howe, a leading expat tax advisor, for allowing us to share this article.

   

The U.S. lost its top position as the world’s most developed financial system, according to a study from the World Economic Forum and economist Nouriel Roubini. The rankings list the U.K. first, Australia second and the U.S. third. London replaced New York as the world’s premier financial center, Roubini said. “London and the U.K. are looking ahead of New York and the United States,” he said. “Overall, both bank and nonbanking activities, in terms of [mergers and acquisitions], venture capital, broker-dealers, investment banking — at the margin suggests that there is a strength now in the U.K. and London.”

Article:  Telegraph (London)

   

In the aftermath of the global financial crisis many investors have begun to reassess their finances and seek out more objective and honest advice.  As a result, investors are taking their money and migrating away from the traditional Wall Street brokerage houses in favor of independent investment advisors. 

But how does one go about finding the right advisor for their unique circumstances?  Today’s Wall Stree Journal featured an article which discusses how to choose the right advisor for you.  You can read it here.

   

We advise our clients to maintain their US credit cards while living abroad, as it is difficult, if not impossible, to get a new US card issued to a foreign address.  This blog post by ReloJournal.com speaks to the other side of this matter; maintaining your US credit.  Good credit takes time to establish and must be used properly in order to be maintained.  Reestablishing credit is difficult and time consuming, so repatriating without a US credit history can make life difficult.

Read more about maintaining your US credit here: http://tinyurl.com/mjxh9m

   

We totally agree with the following comments from the WSJ.   Offshore banking adds little value to honest American citizens, given the protections, low costs and transparency of the U.S. capital markets.  As the leading wealth advisor to affluent American expats with a goal to stay in full compliance with the IRS and foreign tax authorities, we totally support the U.S. in taking a hard line with the Swiss government on this issue.

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Do you know anyone with a Swiss bank account? I don’t, which is probably no surprise since the whole point is secrecy. But evidently there are plenty of Americans who do-at least 52,000 at UBS alone-whose identities the Internal Revenue Service and the Department of Justice are trying to learn.

In light of this highly publicized investigation into tax evasion, I’ve been wondering just why anyone needs or wants a Swiss bank account. For African dictators, international arms traffickers and terrorists, the answer is pretty obvious. And there are certainly citizens of countries whose own banking systems are so precarious, and the risks of persecution for any number of reasons so great, that a Swiss bank account may provide welcome security.

Ample Confidentiality

But the U.S. is not one of those countries. Despite our recent banking woes, the U.S. has plenty of financial institutions with impeccable balance sheets. It has a legal system second to none that provides ample confidentiality and due-process protections. But it doesn’t offer ironclad secrecy in the face of a legitimate, court-sanctioned subpoena, which means it doesn’t lend itself to tax evasion.

That is evidently why California billionaire Igor Olenicoff parked hundreds of millions of dollars with UBS, and subsequently pleaded guilty to a felony count of filing a false tax return. His former UBS banker, Bradley Birkenfeld, pleaded guilty to conspiracy and testified that UBS bankers prospected for wealthy U.S. clients eager to avoid taxes at art shows, musical performances, yachting regattas, golf and tennis tournaments-anywhere “rich people hang out.” They even served as couriers to avoid money transfers that might be detected by U.S. surveillance, according to Mr. Birkenfeld’s testimony.

All of this was met with depressingly great success: Prosecutors say UBS managed $20 billion for U.S. customers. Earlier this year, UBS agreed to pay a fine of $780 million, admitted that it helped U.S. citizens evade taxes and agreed to cooperate with U.S. investigators. But now it is balking at turning over its clients’ names.

UBS says it would violate Swiss financial privacy laws if it complied. In that case, UBS (and its government) should be faced with a simple choice: continue its policy of strict secrecy, in which case UBS should forfeit the right to do business in the U.S.; or compromise, aligning its banking laws with those in the rest of the civilized world.

Moral High Ground

I have no sympathy for the bank’s plight. Switzerland is a sovereign nation, free to pursue whatever banking laws it deems appropriate. That doesn’t mean the U.S. has to open its borders to the exploitation of its citizens for tax evasion and other nefarious purposes, nor should other countries.

A trade war would be unfortunate, and the Swiss might retaliate by banning U.S. financial institutions there. But the U.S. would have the great advantage of the moral high ground. I think the likely outcome is clear.

Nor do I have any sympathy for those Americans whose identities may be made known, especially those like Mr. Olenicoff, a billionaire who owned a yacht and maintained foreign accounts in multiple so-called tax havens. Those who have accepted an offer of amnesty should count themselves lucky. Paying taxes is an obligation all American citizens share, but somehow tax evasion seems more reprehensible when committed by the rich, who owe their prosperity to this country and could so easily meet their obligations.

With the Madoff scandal still fresh in the public mind, I hope the Justice Department maintains its tough stance. The wealthy need to be reminded that all Americans stand equal before the law.

Source:  WSJ, July 15, 2009, by James B. Stewart

   

The US and Switzerland have agreed to new tax information sharing standards  in another bold step forward by the US government in their quest to find and penalize US citizens hiding assets in secret offshore accounts.  Read more here.

   

All US persons having an interest or authority over a foreign bank or financial account must file a Report of Foreign Bank and Financial Accounts (FBAR) with the IRS each year.  

Treasury Form TD F 90-22.1 must be received by the IRS - not just postmarked - by June 30th, 2009, in order to be considered on time.  Any foreign account which had a value greater than $10,000 at any point during the calendar year must be reported. 

Read more details and find out about recent changes to filing requirements here.

   

We have recently posted a new article to our online Knowledge Library entitled, “The World of Estate Planning for US Expatriates” by R. Scott Jones, Esq. 

This is the most comprehensive article on estate planning for expats that we’ve ever come across.  Thanks to our friend, R. Scott Jones,  an attorney practicing in the area of individual international taxation, and a founding partner of Goldstein Jones LLP in New York, for sharing it with us.

   

In its quarterly “Global Prospects” research publication, the Centre for Economics and Business Research predicts that Europe, the U.S. and Canada will generate less than 50% of global economic output this year. “We had expected this to happen but not quite so soon,” CEO Douglas McWilliams said. “The West will have to start to get to grips with the fact that we are no longer dominant and cannot expect to have things our own way.”

Article:   Bloomberg

   

We thought the following article from the Wall Street Journal had a lot of terrific information for small investors on how they should evaluate their current and prospective financial advisors.  We believe strongly that small investors deserve an advisor who acts as a true fiduciary…keeping the clients’ best interests first.  Due the pervasive “sales culture” of Wall Street, this kind of financial advisor is rather hard to find.

Taking Control

Small investors have been whipsawed by the market turmoil. But there are some simple steps they can take to better protect themselves.